Tesla, General Motors sparring over car sales in Indiana

Tesla says GM is picking a fight with the automaker over selling cars in Indiana.

Handout, Tesla

Tesla has been selling cars in Indiana for the last two years, but that might change in 30 months' time

by
Dana Hull and David Welch, Bloomberg | February 25, 2016

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Tesla, which has long skirmished with auto dealers over its practice of selling cars directly to consumers, has accused General Motors of being the driving force behind a bill that seeks to kick Tesla out of Indiana.

Tesla is licensed to sell directly to consumers in Indiana, and has operated a store in Indianapolis for two years. Indiana State Representative Kevin Mahan has introduced a bill that would “provide that a dealer license issued to a manufacturer expires after 30 months and may not be renewed.” Tesla would have to find franchised dealers to sell in the state after 30 months.

The legislative battle comes as both companies prepare for a head-to-head competition to sell lower-priced electric cars that target the mass market next year. GM’s lobbying helped create the proposal, which some have dubbed the “Kill Tesla” bill because the legislation is specific to manufacturers of all-electric vehicles.

“I want Tesla here,” Mahan said at a Jan. 27 hearing of the Indiana House Roads and Transport Committee. “But they need to have a dealership. This bill gives them two-and-a-half years to put a dealership system in place.”

Tesla has publicly accused GM of being behind the legislation and writing the bill for Mahan. GM offered “input” into the bill, but the author was in charge of the language in the draft, Chris Meagher, a spokesman for the Detroit-based automaker, said in an e-mail.

Mahan, a Republican, represents a largely rural district northeast of Indianapolis. Indiana has a part time legislature; Mahan owns an insurance agency.

“I want Tesla to put a dealership system in place,” said Mahan in an interview. “This is about protecting my constituents. If someone wants to spend over $100,000 on a car, that’s one thing. But when you are talking about a car costing $30,000 or $40,000, consumers ought to be able to drive to their local dealer and have a face-to-face conversation.”

‘Kill Tesla’

“This is nothing more than a protectionist effort by General Motors,” Diarmuid O’Connell, Tesla’s vice president of business development, said at the Jan. 27 hearing. “General Motors made a decision in the early part of the last century about their business model. I see no reason why, under general free-market principles, Tesla shouldn’t have that same right.”

Jason Wetzel, a regional manager of public policy for GM, spoke in favor of the bill “on behalf of nearly 49,000 GM employees and retirees across Indiana” and stressed GM’s long history of manufacturing in the state.

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The Detroit Three automakers have operated under franchise laws that have been on the books for decades and were originally put in place to prevent manufacturers from opening stores that would compete directly with mom-and-pop dealers.

“We welcome competition from any manufacturer,” Wetzel said. “Competition in a fair market only works when the same set of rules are applied to all participants. That’s what our bill would do. What we’re asking is: If you’re a manufacturer, you can’t own a dealership. We can’t, Ford can’t, and we’re just saying that is the way the market is set up and that’s what works best.”

A House committee voted to send the bill to “summer study,” but a Senate committee amended the bill and it’s slated to vote on the amendment Thursday. Tesla does have allies in the statehouse.

“I call this the Kill Tesla bill,” said Representative Curt Nisly, a Republican from Goshen, who was at the Jan. 27 hearing. “GM testified in favor of the bill. So did the auto dealers. I didn’t see anyone from Chrysler and Ford. We should be welcoming Tesla to the state of Indiana, not chasing them out. I’d like to see them build their next gigafactory here.”

Simmering War

The dispute between Tesla and GM has been simmering for months. When GM CEO Mary Barra spoke at the Consumer Electronics Show in Las Vegas last month, she took a not-so-subtle dig at Tesla while unveiling the all-electric Chevrolet Bolt, which can travel more than 322 kilometers on a single charge. Barra said Bolt customers will benefit from GM’s scale, which includes 3,000 Chevy dealerships nationwide.

“We believe strongly in the dealer model,” Barra said. “Unlike some EV customers, Bolt EV customers never have to worry about driving to another state to buy, service or support their vehicle.”

Tesla has fought state-by-state battles over its ability to operate a retail business for years. As it has done in other states, Tesla in Indiana has turned directly to its loyal owners and enthusiasts for support, urging them to attend a hearing of the Senate Commerce and Technology Committee, scheduled for Thursday morning at the state Capitol. The legislative session ends March 14.

“Let your voice be heard before that hearing to let them know that Indiana should encourage innovation, economic growth and consumer choice,” Tesla wrote in a letter to customers. “Don’t let GM tell you that your only option is to buy a car from a traditional franchised dealer by shutting out Tesla.”

GM just wants every automaker to sell cars by the same rules, Meagher said.